QUESTION: Our group health plan uses a copay accumulator program that does not count drug manufacturers’ financial assistance toward participants’ cost-sharing limits. We’ve heard that the agencies have restricted the use of these programs. Can we still have one?
ANSWER: Some plan sponsors have implemented “copay accumulator” programs in connection with the prescription drug coverage under their health plans. The term “copay” is a bit misleading because these programs may also provide deductible and other cost-sharing assistance. Here is how a typical copay accumulator program works:
Prescription drug manufacturers sometimes offer financial assistance to individuals for certain drugs to help defray costs that might otherwise be an impediment to obtaining the drug (potentially resulting in a lost sale for the manufacturer). Traditionally, this financial assistance reduced the participant’s cost-sharing under the plan. That is, the drug manufacturers would cover all or a portion of the participant’s deductible and copayment or other required cost-sharing under the plan (sometimes up to a specified dollar amount), and the manufacturers’ payments would count toward the participant’s satisfaction of the plan’s deductible and cost-sharing limit. Under a copay accumulator program, however, the drug manufacturers’ financial assistance does not count toward the plan’s deductible and cost-sharing limits. (Essentially, the plan receives the benefit of the financial assistance.) This can result in cost savings to the plan because more of the financial burden is placed on participants and drug manufacturers.
Plan sponsors must ensure that their copay accumulator programs do not violate health care reform’s cost-sharing limit rules, which require non-grandfathered plans to establish an annual cost-sharing limit with respect to essential health benefits. In 2019, HHS issued benefit and payment parameters regulations, effective for plan years beginning on or after January 1, 2020, under which drug manufacturers’ financial assistance toward brand-name drugs was not required to count toward the cost-sharing limit when a medically appropriate generic equivalent was available. HHS specifically rejected a proposal to exclude all drug manufacturers’ financial support from counting toward the cost-sharing limits, including when medically appropriate generic equivalents were not available.
Many viewed this rule as implying that manufacturers’ financial assistance must be counted toward the cost-sharing limit absent a medically appropriate generic equivalent. This reading created a potential conflict with previous IRS guidance regarding HSA-compatible high deductible health plans (HDHPs), under which manufacturer and provider discounts must be disregarded and only amounts actually paid by the individual may be taken into account. In response, the agencies issued proposed regulations permitting, but not requiring, plans and insurers to count amounts paid toward reducing out-of-pocket costs using any form of direct support offered by drug manufacturers to enrollees for specific prescription drugs, regardless of whether a generic equivalent is available. The definition of cost-sharing would be interpreted to exclude expenditures covered by drug manufacturer coupons. Until the regulations are finalized and take effect, the agencies will not initiate an enforcement action if an insurer or plan excludes the value of drug manufacturers’ coupons from the annual cost-sharing limits, including when no medically appropriate generic equivalent is available.
For more information, see EBIA’s Self-Insured Health Plans manual at Section XI.E.7 (“Copay Accumulator Programs for Drug Coupons”) and EBIA’s Health Care Reform manual at Section IX.B.5 (“What Expenditures Must Be Counted Toward the Out-Of-Pocket Maximum?”). See also EBIA’s Consumer-Driven Health Care manual at Section X.H (“Issues Raised by the HDHP Minimum Deductible”).
Contributing Editors: EBIA Staff.